Banking

DIWALI
HOMEWORK
PRESENTED BY
GOURAV JANGID
Std 11
GIVEN BY
NEEDHI MAM

INTRODUCTION
Historically before 2000 B.C. temple was used as a bank. In
Exrope were used to sit on bench to exchange their money and
exhibit their coins. They called this banch as ‘Banco’.In
Germany, the word ‘Bank’ is derived from ‘joint fund’.
A common person knows only that bank means to deposit
money in the bank and withdraw as and when it requires. In fact
bank performs many other function.
Directly or indirectly bank is connected with all economic
transaction of human-being. Banks have provided contribution is
given to solve the problem of unemployment and economic
development of the country . Bank has provided oxygen in the
form of loan to big and small industries. Banks have also started
to give loan to those educated unemployed who wants self
employment . In import-export trade also the services of bank
become essential.

BANKING
An institute providing banking services is
known as bank. This institute continuosly tries to maintain
balance balance between profitability and liquidity. For
maintaining this balance the management of the bank
must be of a high level. In modern age, bank become
centres of faith of millions of person, that is why in real
life its meaning has been derived as a place of putting
faith. For expressing faith it is said proverbially, ‘I bank
on you.’ By keeping this concept at heart indian banking
act has defined banking has : “A service to accept deposit
from people with the intention to invest or lead with the
condition of returning it immediately whenever demanded
at any predetermined time. As institute providing this
service is a bank.

TYPES OF BANKS
1
STRUCTURE OF AUTHORITY

central regional primary

(1)
Central bank
Every nation has one central
bank. It has to control the banking service
industry of the nation. It is a centre of authority
of banking service industry. It has to see faith
of people in bank endures and it has to work
for taking steps for it. Central bank enlist those
banks which satisfy the specific condition and
declares them as scheduled. The name of the
cantral bank of our nation is Reserve Bank
of India

Structure of authority

(2)
Regional/Central Bank
By co-ordinating with
central bank, Regional/ central bank takes steps to
control directly the banking service industry in
different regions. It works to take steps for running
this industry smoothly. State Bank of India is doing
this work in our nation.

Structure of authority

(3)
Primary bank
Primary banks are
providing service directly to the people.
They perform many function of opening
accounts,accepting,deposits,leading,etc.
they work under the control of central and
regional central bank.

The first type of banks from
ownership point of view is public sector banks.
The ownership and management of these banks
are of the government. It is accountable to the
legislative assembly or the parliament like any
other public sector units. Some banks of private
sector were nationlized in independent india.
NOTE => Public sector banks do not become
insolvent, so deposits and other investment
given to these banks remain safe.

(2) Private banks

The ownership point of view, if the
ownership and management of banks remain with certain
citizen, those banks are as private banks.
Note=> Private banks are registered as companies having
limited liability. Banking service companies like H.D.F.C
bank known as shroffs, shahukars and multanis in our
country are private enterprises. Private banks are regulated
by central and regional central banks.

(3) CO-OPERATIVE BANKS

Co-operative banks come into existence under
Co-operative Act as a form of organization. Comparatively, it is
easy to start an organizational unit under Co-operative Act. So,
Co-operative banks are established on a big scale in central
areas. Consent of the central banks is required to start this type
of bank. The central Bank regulates its day-to-day operation
also
e.g

Joint sector is run by the
government and private individuals jointly. The
implementation of government programme is done through
joint sector banks as done by any public enterprise.
Besides, they nourish the elements of efficiency and profit
of private enterprise. Some nationalized banks have been
made joint sector banks by offering their shares to public.

(3) Viewpoints
Organisation

organized unorganized

(1) ORGNISED SECTOR BANKS

Banking service industry is divided in
organized ad un organized work organisation like any other
industries. Organised sector bank work according to declared
rules. They are regulated by the central bank. Their operation
are kept transparent. The internal set-up is also run according
to the declared rules . Banks like Bank of india.

(2) Unorganized bank
People known as ahroffs, shahukar, vaniya,
multani, Pathan are un organized banks in India. They provide
banking services. Regulation are negligible for them. Rural areas
and people having small requirements in India are utilizing banking
services of unorganized sector on a big scale. Generally, the rate of
interest of these banks is high and recovery of their lended money is
very stringent.

FIELD OF WORK
VIEWPOINTS

COMMERCIAL AGRICULTURAL INDUSTRIAL
BANKS BANKS BANKS

(1) Commercial banks

In modern time, special elements are seen in
the scope of a bank of organised banking services. This type of
banks are seen in three main sector of economy. (1) Agriculture
(2) Industry and (3) services, and they have specialised in
providing the services. Commercial banks take the deposits
from the public and land the money for a short period and for a
different activities of different areas. Their aim is to earn profit
as like trade and hence they, are known as commercial Bank.
Most of the businessmen want short term finance and it fulfill
by this banks. Hence, they are also called Mercantile Bank.

Agriculture sector based on nature. Hence, there is
more uncertainty regarding the possibility of crope and quantity
of the crope. In these circumstances, farmer borrow money from
money from unorganised banks at high rate of interest and for the
payment of there debt they become ruined. Considering this fact,
to fulfil the requirement of agriculture sector some organised
banks are established, which are known as Agriculture Banks.
This banks have adopted remarkable specialisation. Some
agriculture banks lead money for development of land. Some
banks lead money on security or mortgage. This type of banks
give guidance to farmer regarding how to increase productivity.

(3) INDUSTRIAL BANKS
To fulfil different requirement of industries, the banks
came in to existence are known as industrial banks. All industries
require money to purchase different gear & resources for the
production. Moreover long-term and short term financial need aries
to face uncertainty and risk of the market. To pay the different
expences of factory and office, long-term financial requirement aries.
To satisfy the financial requirement of the industry, industrial banks
lead money for medium and long-term. In this type of banks. Also
bank, specialization is seen. Some banks lead money only small scale
industries e.g. small scale bank, and some bank lead money to large
scale industries e.g. Industries Development Bank of India (IDBI)
and I.C.I.C.I Bank.

(4) viewpoints

registration

Scheduled Non-scheduled
Banks Banks

(1) Scheduled banks

Central Bank has declared different measure
such as capital of the bank, size of bussiness,
capability of management etc. The banks, which
possess this are registered and included in the
scheduled of central bank are called scheduled
bank. Central Bank and Regional central Bank keep
watch on such banks. Besides this , when financial
crisis arise in this banks, central bank immediately
give them financial and other help. Hence, these
scheduled banks are more trustworthy e.g.
Industrial Development Bank of India (IDBI) and
I.C.I.C.I Bank.

(2) Non-scheduled banks

The banks, which do not posses the standards decides
by Central Bank or due to no desire, are not listed and included
in the scheduled are called as non-scheduled bank. This bank
should compulsory declared to their depositor and public that
this bank is Non-scheduled Bank. The management of this bank
should be on professional base.

(1) LOCAL BANKS

This type of bank is formulated by keeping geographical
areas as point of view. Banks which are serving city, block or a district
are known as local bank. The working of this bank is very compact.
Most of the co-operative banks are local.

(2) National banks

Most of the banks are national. As most of the
economic activities are taking place within the country. These
national banks, while adapting to the situation, are performing
their activities at national level. Their branches are in the big
cities of the country . So, their expected services are provided in
big economic centres ,i.e. cities, e.g. Dena Bank.

(3) Global or foreign banks :

Those banks which are working in
various countries are known as global banks.
With the increase in international economic
operation, the development of these banks
also take place. International tourism also
helps greatly in the development of these
banks. These banks are working as national
banks in their original nations.

(1) Urban banks

In the city area of the country proportion of industries and
population is more. The need of the city area is also different
than rural areas. To satisfy this needs, the banks established in
cities are called urban banks. These banks work formaly as per
the rules decided by the government. Their work-load is more.

Rural Banks are established to provide financial help to agriculture
activities run on small scale in rural areas. The administration of such banks
is done by very limited persons. In rural banks the proportion of un
organized bank is more. In this type of banks restrictions regarding time and
formalities is very less and activity oriented concept is is more. Hence, they
make changes in their time requirement. Such banks remain in contact with
their district or taluka’s central bank.

 In the beginning of banking
profession, its administration was run by
individual or family and it had no any
branches. Hence, it was called Unit Banks.
Before many year in Gujarat, people who gave
Banking services were called ‘Nanavati’. Unit
Banks were found in Bania caste. With the
change in time and circumstance existence of
this banks are not seen.

The bank which posses their own officies in different areas
to provide banking service over above on the place of their
head office, is called Banks with the branches. In this bank high
level skill and management is necessary for recording the
trancation between the branches and between branch and
head office.
As stated above, different types of bank can be noted at
different viewpoint. Any one type of bank can be included also
in other type e.g Mehsana Nagarik Co-operative Bank is a
primary Bank, also a Co-operative Bank is a primary Bank, also a
Co-operative Bank, Non-scheduled Bank, bank with branches
and at the viewpoint area it is also a Nagarik Bank.

Function of commercial banks
MEANING
Commercial banks do the function of accepting
deposits and lending funds to trade, industry and other individuals.
Mostly commercial banks do the function of making short term
advances to the businessmen. The intention behind of such activity
of banks is to earn profit, hence they are termed as commercial
banks. Mostly such banks provide service to business class.
Similarly the banks are known as Mercantile Banks. In our country
such banks have development on large scale. Bank of India, Bank
of Baroda, etc

(1) ACCEPTING DEPOSIT
Bank accepts the financial saving of the people
as a deposit. Bank gives interest on the amount of
the deposit to depositor. The responsibility of bank
is to return the basic amount of the depositors in
time and to maintain their trust . Bank recive
deposit in three ways.

Saving account Current account Fixed deposit account

bank receive deposit mainly through
saving account. The accountholder can do the
transaction in limited number. Accountholder
can withdrow money from their account by his
own sign on the cheque or through withdrawal
slip. He can deposit his own cash, cheque and
draft received, in his account. Account holder
has to keep minimum balance in his account as
decided by the bank. Bank can force to their
accountholder regarding this, and hence mare
deposit can be obtained by this method

In current account there is no
restriction on the number of financial
transaction. Hence, current account become
more popular in businessman. Current
accountholder has also to keep minimum
balance in his account as like saving
accountholder, decide by the bank.

Fixed deposit account

To use amount of the depositors
for specific period, bank accept the fixed term
deposit and gives the receipt to depositor for
receiving the amount. The bank give
guarantee in writing to return the amount of
deposit with interest to depositor after
finishing decided time i.e date of maturity.
Depositor can not withdraw their amount
before date of maturify and hence bank gives
more interest on the deposit compare to
saving account.

It is also an improtant function of a bank to lend
the money received through saving account and fixed term
deposit to needy person. Bank earn because bank gives
interest at low rate on deposit and charge high rate of
interest on advances. After paying expenses from the
earning bank gets profit. If, after receiving the
deposit, that amount is not landed deposit, that amount is
not landed then bank has to suffer loss. Beside this, if
recovery is not done in time after lending the money then
also lending activity become loss making. Lending of
money done in three ways as like Overdraft, Cash
credit, Loan.

(3) MAKING INVESTMENT
If lending is less then the sum of bank’s
own capital and the total movement of deposit, the
cash on hand of deposit is without any earning.
So, third core function of banks is to invest this
cash. By monitoring the inflow and outflow of
cash, investment is to be made on the basis of
flawless calculation. Liquidity is to be maintained
continously while making investments. Arrangement
of getting cash immediately from investment is to
be made inevitably during emergencies and
contingencies. It seems that it always advisable to
invest in government securities and in the cent per
cent sound institutes.

(4) Doing inter banking transaction
Banks are also executing function of
transacting with different banks. At times
certain bank needs money for 24 hours or for
lesser period than that. On the other side there
are some banks where unutilized money is lying
idle. Such banks internally strike an exchange of
money; and overcome their difficulties. Such
money when called for are returned
immediately. Hence’ the same is known as ‘call-
money’. In fact in such transaction one bank
lends money and another bank receives the same
as advances.

COMMERCIAL BANK FUNCTION
OTHER FUNCTION
1. Financial transaction of customer
2. Doing transaction pertaining to foreign
exchange
3. To issue letter of credit
4. Providing service of draft
5. Providing information of credit of related
parties
6. Become an under-writer
7. To issue credit card and debit card
8. To provide teller service

Banks has mainly two types of
customer; (1) depositor and (2) Borrowers. These
customer are having their own financial
transaction. Financial transaction ultimately result
into payement or receipt. Bank provides service at
this last stage. It conduct transaction from the
payement of electricity bill to collecting money of
bills receivable. Customer are having many types
of financial transaction, the list of which always
remain incomplete.

(2) Doing transaction
pertaining to foreign exchange

Banks provide services of
bringing money from forign countries
and of sending it. It provides services
of receiving and dispatching
documents connected with foreign
trade. Only those banks which have
been permitted by the central bank
can do this job.

Letter of credit is a letter written by one
bank to another bank regarding the credit of
their accountholder. How much credit is granted
to the accountholder is pointed out in his letter.
Before granting the credit bank collect that
much amount from that person or bank demand
the security of that much amount. This letter of
credit makes the financial transaction very easy
and reliable because in this letter name of that
person, amount granted as credit, payement
period, etc. is pointed out.

(4) PROVIDING SERVICE OF DRAFT

Draft is known as demand draft.
Bank provide service of pay-order, telegraphic
transfer, telephone transfer, E-mail and mail
transfer also.

(7) To issue credit card and debit card

Bank perform an important function to give credit card.
Bank study very carefully regarding the credit of a person, who
have applied for credit card. After this study if feel that
applicant is capable and willing to pay the debt of specific
amount, than bank give credit card for that much amount to
applicant. In recent time master card, BOB Card etc. Credit
cards become more popular.
Debit card is also in the existence. This type of
cardholder has to deposit specific amount in advance as per
their desire, in the bank. Then after while purchasing, he has to
present his debit card and amount of purchased goods is
debited from his account.

The bank come to know
about the financial soundness of many
persons with whom it has frequent financial
transactions. As the bank has to earn faith of
people so related ones also have to earn
faith of the bank. Third party knows that the
bank does know about the financial
soundness of those persons with whom it
deals. Within the limit of law and with no
onus on it, the bank does the work of
providing the information of soundness of the
party.

When a new company enters the
capital market and collect through shares, it is
apprehensive whether it can collect at least the
minimum subscription to start the business. It is afraid
of non-start of business in this situation. So, it request
bank also to give an undertaking that in the absence of
receipt of minimum subscription bank will fill up the
deficiency.

(8) To provide teller service

This service is given by bank is known as ATM.
When depositors or accountholder by depositing money or by
investing gives surety of their solvency, then bank issue them
ATM card. In spacified branches of the bank machine are kept
for receiving this card. When cardholder wants to withdraw the
amount of less than the credit balance, then he has to insert the
card in machine and after indicating the amount by pressing
the button, he can get money at anytime during 24 hours.

Banking

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